I remember distinctly arriving in the south of Spain from Germany for a five-month stay in early 1998, and sitting in a pizza parlour noting that it was pretty much one peseta to one pfennig – there were around 90 pesetas to the deutschmark. I opened a guidebook my parents had given me from a generation beforehand, which noted that at the time that there were 11 deutschmarks to the pound sterling and 70 pesetas. The maths are not difficult – the peseta had devalued versus the deutschmark so dramatically that, from the early ’70s to the late ’90s, the average German resident’s income had doubled compared to a Spanish resident’s due solely to currency differentials alone every two years.
As I looked out into the February heat over the wonderful city of Granada, Spain’s reliance on the tourist trade (and thus on cheap currency) was not hard to understand; as I drifted up into the Andalusian pueblos to where they grew the olives (cheap currency is good for that too) it was noteworthy, however, that the machinery used to crush them was German – a quality, necessary engineering product not needing cheap currency at all. This is grossly simplified, but it is still not a million miles from the trading truth that the German engineer went on holiday to Spain and brought home some olives while he was at it and, with the proceeds, the Spanish bought his machinery – for this arrangement to work, Spain had to be ever cheaper (and thus devalue its currency versus the deutschmark regularly).
The following year, in 1999, this perfectly successful arrangement for both sides abruptly ended. Spain could no longer devalue its currency versus the deutschmark because, in effect, it was using the deutschmark! The outcome was that the Spanish, to make ends meet in the new reality where they could no longer rely on cheap currency, had to go on a mad construction and credit binge – which ended, when the bubble finally burst on the realisation that this was nothing but money from thin air – in a horrendous 25% unemployment rate.
So when is someone finally going to say it? The euro doesn’t work; it could never possibly work; and it has to be dismantled so we can return to the type of trading relationship which actually suits all Europeans?